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Hosted by Mark N. Bass,The Capital matchpoint, www.capitalmatchpoint.com, 770.433.8250…A term that gets thrown around a lot when capital seekers are talking about financial information with investors is gross margin. The question that usually comes up is, what is gross margin? Gross margin, mathematically speaking, is a term that tells an investor or financial analyst or whoever is looking at an income statement (an income statement is where gross margin is derived from) is how profitable a company’s core operations are. What gross margin does is it takes revenue generated by a company and applies against it only those costs directly associated with generating that revenue. For instance, if you are in a manufacturing organization, your direct labor, or the labor required to assemble a part and raw materials, would go into what is called cost of goods sold. Those costs of goods sold would all accumulate to subtract from revenue and determine your gross margin. The reason investors look at this is they use it to determine how profitable your actual core operations are, what kind of overhead you can support, and at what point, in terms of low sales, would overhead chew up profits. If an entrepreneur, or capital seeker, is trying to calculate gross margins and maybe feels uncomfortable doing so or has some questions about what actually goes into the calculations, they should give us a call at the Capital Match Point. We deal with this topic a lot and would be happy to help …
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